The broad and long-term objectives of the proposed 3-year project are to develop more effective methods of identifying housing options to improve the residential stability and community tenure of persons identified as being homeless and severely mentally disabled. The specific aims of the study are to evaluate and compare the efficacy of transitional versus permanent housing for clients of a residential program specifically designed to serve homeless mentally ill persons. The target population are clients who meet DSM-III-R criteria for psychotic or affective disorders and who are homeless, i.e., living in shelters or on the streets at enrollment. Outreach efforts will be made to shelters and services for homeless persons: proposed study N=120 clients. Clients who meet study criteria for severe mental disability and homelessness and agree to participate in the project will be randomly assigned either to 1) a transitional program from which clients "graduate" to permanent housing arrangements, or 2) a permanent program which will help them locate and adjust to nontransitional housing options. Clients in both groups will receive on-site case management, psychiatric treatment and assistance designed to prepare them to live in permanent housing and be linked to community mental health services including case management. Clients in Group 1 will graduate from the program and move to permanent housing and community services; clients in Group 2 will transfer to community services but will remain in their residence upon graduation from the program. The Structured Clinical interview for DSM-III-R will be used to obtain psychiatric diagnoses; diagnostic and demographic characteristics of the two groups will be examined to ensure comparability. To assess efficacy of the two systems of service provision structured interviews developed by the Evaluation Team for the Robert Wood Johnson Foundation Program on Chronic Mental Illness will be used to obtain baseline and follow-up measures of Participants' clinical status, functional level, quality of life, housing stability, and use of psychiatric and mental health services. Documented provision of mental health and other services including community, inpatient, and emergency services, as well as contacts with the criminal justice system will be compared for the two groups for pre-and post program periods. Secondary data analysis will include cost-benefit analysis of the two programs and examination of client and service characteristics associated with program "success". Success will be defined as increased community tenure, improved status on the variables measured by the client interview, decreased use of emergency and inpatient services, and fewer contacts with the criminal justice system in the post-program period. The main study hypothesis is that the transitional program will be as effective as but more cost-efficient than the permanent program.